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Nav Bharat F. Vs. Delhi Development Authority - Court Judgment

SooperKanoon Citation

Subject

Arbitration

Court

Delhi High Court

Decided On

Case Number

Suit No. 1611A of 1994

Judge

Reported in

1997IIIAD(Delhi)599; 1997(1)ARBLR541(Delhi); 66(1997)DLT431

Acts

Indian Contract Act - Sections 73

Appellant

Nav Bharat Construction Co.

Respondent

Delhi Development Authority

Advocates:

P.C. Markanda,; Naresh Markanda and ; Sumeet Bansal, Ad

Cases Referred

Pawan Joinery Mills v. Delhi Development Authority

Excerpt:


.....intimated to the respondent well before the expiry of the contract period under exb. in the objection filed by the respondent in respect of the aforesaid claim, it has been stated that inspection reports of the quality control cell were sent to the petitioner for doing the rectification, but, he failed and neglected to do the same and, thereforee, a reduction item statement was prepared and an amount of rs. the learned counsel appearing for the respondent submitted before me that the arbitrator while awarding the aforesaid amount in favor of the petitioner failed to appreciate clause 25b of the agreement wherein, it has been specifically provided that the decision of the superintending engineer regarding such recoveries or reduction statement was final and binding. in the instant case, i find that no such notice as envisaged under clause 14of the agreement was issued by the respondent to the petitioner calling upon the petitioner to make good the defective work and unilaterally prepared a reduction item statement. in the instant case, the respondent failed to issue the notice as envisaged under clause 14 of the agreement calling upon the petitioner to rectify the defects...........agreement entered into between the parties, the work was to commence on 22.8.1987 and the date of completion was 22.8.1988. (2) in respect of the aforesaid agreement, disputes arose between the parties relating to payment to be made to the petitioner and accordingly, the said disputes were referred to the arbitrator by the engineer member of the respondent in terms of clause 25 of the agreement entered into between the parties. the engineer member appointed shri s.k. ahuja of the department of telecommunication as the sole arbitrator and the arbitrator was specifically directed to give reasons for the award. (3) the arbitrator entered into the reference and accepted the statement of claims and counter statements of facts along with the rejoinder to the counter statement of facts and after hearing the parties made the award on 30.3.1994. the arbitrator filed the award along with the records of the arbitration proceedings in this court on receipt of which, notices of filing of the award were issued to the parties. on receipt of the aforesaid notices, the respondent has filed an objection against the award which was registered as i.a. no. 889/1995. the petitioner however filed a.....

Judgment:


M.K. Sharma, J.

(1) The petitioner entered into an agreement with the respondent for construction of 656 Lig houses at Jahangirpuri, including works relating to water supply, sanitary work and internal development. As per the agreement entered into between the parties, the work was to commence on 22.8.1987 and the date of completion was 22.8.1988.

(2) In respect of the aforesaid agreement, disputes arose between the parties relating to payment to be made to the petitioner and accordingly, the said disputes were referred to the Arbitrator by the Engineer Member of the respondent in terms of Clause 25 of the agreement entered into between the parties. The Engineer Member appointed Shri S.K. Ahuja of the Department of Telecommunication as the Sole Arbitrator and the Arbitrator was specifically directed to give reasons for the award.

(3) The Arbitrator entered into the reference and accepted the statement of claims and counter statements of facts along with the rejoinder to the counter statement of facts and after hearing the parties made the award on 30.3.1994. The Arbitrator filed the award along with the records of the arbitration proceedings in this Court on receipt of which, notices of filing of the award were issued to the parties. On receipt of the aforesaid notices, the respondent has filed an objection against the award which was registered as I.A. No. 889/1995. The petitioner however filed a reply to the aforesaid objection, but did not file any objection against the award and prayed that the award be made a Rule of the Court.

(4) Accordingly the Counsel appearing for the parties were heard, who took me through the records of the arbitration proceeding including the award.

(5) The jurisdiction and power of the Court to interfere with an award passed by an Arbitrator is by now well settled. Resolving of disputes through arbitration has come to be accepted in India for its quicker disposal and the same being a proceeding initiated, continued and completed by the consent of the parties. However, the Courts through various decisions have laid down that the Court has a duty to oversee that the Arbitrator acts within the norms of justice. In that context, the Arbitration Act has provided for the provisions of Sections 30 and 33 which enumerate the grounds on which the award could be set aside. The Court have also laid down the scope and limit of correction of an award by the Court, while dealing with the objections filed against the award under Sections 30 and 33 of the Act. The award of the Arbitrator can be interfered with or set aside or modified only within the four corners of the procedure provided by the Arbitration Act.

(6) HALSBURY'S Laws of England, Volume 2,4th Edition para 623 reiterates that an Arbitrator's award may be set aside for error of law apparent on the face of it. The award can be set aside if, inter alia, the Arbitrator misconducts himself or the proceedings. It is also laid down by the Supreme Court that it is not misconduct on the part of an Arbitrator to come to an erroneous decision or wrong conclusion or failure on his part to appreciate facts. (SeeM/s. Hindustan Tea Co. v. K. Shashikant & Co., : AIR1987SC81 )

(7) In the instant case, the Arbitrator in terms of the reference was duty bound to make a speaking award, that is, to say he has to give reasons for his conclusions. In terms of the aforesaid reference, the Arbitrator in the instant case has passed a reasoned award. thereforee, the purpose would be to see whether the Arbitrator has taken a view which could not possibly be sustained on any view of the matter or that such reasons which are recorded by the Arbitrator are erroneous as propositions of law. In M/s. Sudarsan Trading Company v. Government of Kerala : [1989]1SCR665 , it has been held that an award could be set aside if the Arbitrator has misconducted himself or has proceeded beyond his jurisdiction. It can also be set aside where there are errors apparent on the face of the award. It is, however, to be borne in mind that these are separate and distinct grounds. As and when the Arbitrator interprets and construes certain provisions of the agreement, the Court is to see that such a construction is a construction which is conceivable or possible and only if it is found that there was some mistake in the construction, then also it is to be further seen as to whether the conclusion arrived at by the Arbitrator is a plausible conclusion in which case no interference is possible.

(8) In U.P. Hotels etc. v. U.P. State Electricity Board : AIR1989SC268 , it has been held by the Supreme Court that even assuming that there was an error of construction of the agreement or even that there was an error of law in arriving at a conclusion, such an error is not an error which is amenable to correction even in a reasoned award under the law and in order to set aside an award, there must be a wrong proposition of law laid down in the award as the basis of the award. The Courts have also held that the Court cannot sit in appeal over the views of the Arbitrator by re-examining and re-assessing the materials as has been held in Puri Construction Pvt. Ltd. v. Union of India : AIR1989SC777 . This Court in Jagdish Chander v. Hindustan Vegetable Oils Corpn. and Another : AIR1990Delhi204 held that when the parties by agreement refer the disputes to an Arbitrator then the decision of the Arbitrator is not to be lightly interfered with by the Court.

(9) In the backdrop of the aforesaid legal propositions set down by the Court, let me examine the award passed by the Arbitrator having regard to the submissions of the learned Counsel for the parties.

(10) The learned Counsel appearing for the respondents vehemently contended that the award passed by the Arbitrator in respect of each of the claims is not sustainable particularly, in respect of Claim No. 1 and Claim No. 2. In view of the submissions made, let me examine the award passed by the Arbitrator in respect of the claims raised in the objections filed by the respondent including Claim No. 1and 2.

(11) Claim No. 1 : This was a claim for payment of compensation of Rs. 35,17,322.00 to recover the losses due to infructuous overhead expenses of loss of profit resulting from breach of contract. After considering the various contentions raised by the parties and having regard to the records of the case, the Arbitrator awarded a sum of Rs. 8,81,342.00 as against the claim of the petitioner. The Counsel appearing for the respondent submitted that the aforesaid award in respect of claim No. 1 is ex fade illegal and is liable to be set aside on a proper interpretation of Clauses 5,10 and 10c and condition No. 1 of Specifications and Conditions of the agreement. The learned Counsel submitted that the extension of time for completion of the construction work was granted to the petitioner at his own request and once the extension of time was granted to the petitioner (contractor), the petitioner could not have claimed anything over and above what is stipulated under the agreement. He further submitted that the agreement provides for granting benefits to the Contractor under Clause 10-C of the agreement which have already been extended to the petitioner by making payments under the said Clause and, thereforee, the petitioner could not have claimed anything over and above the amounts provided under the agreement. He further submitted that the Arbitrator also acted illegally in taking into consideration the cost index as a factor for making the award in respect of the claim. He further submitted that in terms of Section 73 of the Indian Contract Act, the damages to be awarded should be those which have been actually suffered by the parties and in the present case, there being no proof of actual damages having been suffered by the petitioner, the said award is vitiated and is liable to be set aside. The Counsel appearing for the petitioner, however, submitted that the date of commencement of the work was 22.8.1987 and was to be completed by 22.8.1988, but due to various breaches of contract on the part of the respondent the work came to be completed only on 26.12,1989 with a delay of about 16 months and 4 days. The Counsel also drew my attention to the fact that the construction work was actually held up on accounts of various delay in departmental decisions. In support of his submission, the Counsel relied upon the Extension of Time Proforma, Part II. He also brought to my notice the intentions expressed by the petitioner even at the very initial stages that any delay attributable to the respondent would result in over stepping of schedule of time and if it so happens, then the petitioner would be entitled to charge 25 per cent extra over and above their quoted rates. I have also carefully perused the contents of the award passed by the Arbitrator in respect of the aforesaid claim. I find that the Arbitrator considered the entire evidence on record as also the case law cited by the parties and on such consideration of the facts placed before it as also the various clauses of the agreement came to the conclusion that the respondent caused delay in completion of the work. It is further noticed by me that he has taken into consideration only such delay which was not specifically barred under the terms of the contract. He has also taken note of the admission of the respondent that the work was held up on account of various delay in departmental decisions. It is stated in Clause 5 of the Agreement that if the contractor desires an -extension of time for completion of the work on grounds of his having been unavoidably hindered in execution of the work, he should apply in writing to the Engineer-in-Charge and on such request being made, the Engineer-in-Charge may authorise such extension of time, if any, which may, in his opinion, be necessary or proper. Apparently, as found by the Arbitrator, the construction work was held up on account of various delays in departmental decisions and, thereforee, the time for completion of work was extended in the present case. Clause 10 of the Agreement relates to stores to be supplied by the respondents. In the said clause, it is provided that if there be any delay in making such supplies, the contractor would not be entitled to any compensation or damages. A reference may also be made to Clause 10C which relates to the provision that if during the progress of the works, the price of any material and/or wages of labour increases, in such cases, the contractor would be entitled to payment of such increases in the prices of material or wages of labour. On consideration of the facts and circumstances of the present case, it is crystal clear that the claim made in Claim No. 1 by the petitioner did not relate to a claim under Clause Ioc, nor a claim under Clause 10 and, I find that, the amount awarded to the petitioner by the Arbitrator as against the aforesaid claim-is not barred under the terms of the contract. thereforee, it cannot be said that the Arbitrator misinterpreted the provisions of Clause 5 read with Clauses 10 and Ioc of the Agreement. Coming to the next submission of the learned Counsel for the respondent that the Arbitrator has misconducted himself by applying the cost index in computing damages in the present case. Section 73 of the Indian Contract Act states that the party who suffers by breach is entitled to receive from the party who have broken the contract, compensation for any loss or damage caused to him thereby. What would be the measure of profit and what is the nature of proof that is required to be proved to sustain such claim could be examined by the Court, but, the fact remains that such a claim under the aforesaid head is admissible has been held in A.T. Brij Paul Singh & Bros. v. State of Gujarat : AIR1984SC1703 . If the Arbitrator finds that it was fair and reasonable to work out the increase on the basis of cost index applying the Cpwd Manual, no defect could be found in the Arbitrator doing so to arrive at a judicious and reasonable decision. The provisions of Cpwd Manual is followed by the respondent as is apparent from the agreement itself under the head 'Specifications and Conditions'. On the facts also, I find that the petitioner intimated to the respondent well before the expiry of the contract period under Exb. 'C-15' that the petitioner would claim 25 per cent extra for the work done during the extended period of contract which was by a subsequent communication, namely 'C-27' was reduced to 20 per cent. On computation of the damage awarded in the present case, I find that the Arbitrator has not awarded even at 15 per cent. In that view of the matter, in my opinion, there is no misconduct committed in his award against the aforesaid Claim No. 1.

(12) Claim No. 2: Claim No. 2 relates to payment as reimbursement of recovery made on account of R.I. Statement amounting to Rs. 23,539.23. The Arbitrator on consideration of the evidence on record including the Reduction Item Statement and on appreciation of the various clauses of the agreement awarded the aforesaid claim in full, that is, by awarding a sum of Rs. 23,539.23 in favor of the petitioner. In the objection filed by the respondent in respect of the aforesaid claim, it has been stated that Inspection Reports of the Quality Control Cell were sent to the petitioner for doing the rectification, but, he failed and neglected to do the same and, thereforee, a Reduction Item Statement was prepared and an amount of Rs. 23,539.23p was recovered on account of defective work. The learned Counsel appearing for the respondent submitted before me that the Arbitrator while awarding the aforesaid amount in favor of the petitioner failed to appreciate Clause 25B of the agreement wherein, it has been specifically provided that the decision of the Superintending Engineer regarding such recoveries or reduction statement was final and binding. According to the learned Counsel, the same being an accepted matter, the Arbitrator was not justified in making an award in respect of the aforesaid claim and thereby, misconducted himself. I have considered Clause 14 of the Agreement which is relevant for the purpose of deciding the present claim. On scrutiny of the aforesaid Clause, I find that there is a pre-requisite of serving a notice under Clause 14 of the Agreement for setting right the defect in the work, if any. In the instant case, I find that no such notice as envisaged under Clause 14of the Agreement was issued by the respondent to the petitioner calling upon the petitioner to make good the defective work and unilaterally prepared a Reduction Item Statement. It further appears that in terms of Clause 14, the Engineer-in-Charge has the obligation first to call upon the contractor in writing to rectify the defects, failing which the Engineer-in-Charge has the option to rectify the defect or to re-execute the work at the risk and expenses of the contractor. In the instant case, the respondent failed to issue the notice as envisaged under Clause 14 of the Agreement calling upon the petitioner to rectify the defects. The Arbitrator was justified in holding that the recovery made by the respondent from the Bills of the petitioner was not justified and that no recovery under such circumstances could be effected. I further find that the Arbitrator has come to a definite conclusion on appreciation of evidence on record that Clause 25B of the agreement is not applicable to the facts and circumstances of the present case. This Court cannot sit on appeal and re-appreciate and reassess the evidence on record to give a contrary finding than what is recorded by the Arbitrator. Besides, the Arbitrator has also the right to consider and interpret the various clauses of the agreement and since in exercise of such a power the Arbitrator has come to a plausible conclusion that Clause 25B of the Agreement is not applicable and that the recovery sought to have been done in the instant case could not have been so effected for non-compliance of the requirements of Clause 14 of the Agreement, the said conclusion of the Arbitrator in respect of the aforesaid claim is held to be justified and accordingly, this award is upheld.

(13) Claim No. 3 :Claim No. 3 relates to payment of Rs. 1,38,854.57 on account of extra substituted items, in respect of which the Arbitrator has awarded in full. On appreciation of the evidence in record including the documents filed by the parties and also on consideration of the arguments of the parties, the Arbitrator came to the conclusion that the parties were bound by the stipulations of Clause 12 of the Agreement and that the petitioner were bound to do the work only at the rate quoted by it and in any case, not a rate which was lower than the one mutually agreed upon between themselves. The Arbitrator has further come to a conclusion that in view of the Tabulated Statement (Exb. P-64') not being challenged by the respondent the petitioner is entitled to an award of the claim in full. The aforesaid conclusion arrived at by the Arbitrator appear to be on the basis of appreciation and assessment of the evidence on record. The tabulated statement (Exb. 'P-64') is also not challenged by the respondent. Accordingly, the aforesaid award passed by the Arbitrator against Claim No. 3 appears to be justified.

(14) Claim No. 4 : Claim No. 4 relates to daim for Rs. 2,44,100.00 for steel reinforcement beyond deviation limit. On careful perusal of the award passed by the Arbitrator, I find that on scrutiny of the analysis submitted by the petitioner, he found these items to have been correctly priced. The Arbitrator also found that the respondent did not refute the analysis at the time of its submission and, thereforee, the same would be deemed to have been accepted. He also found that the quantity of work executed has not been challenged by the respondent and, thereforee, the claimant has given the details of an amount of Rs. 2,44,984.00 vide Annexure Ii and after considering the deviation limit as 50 per cent, the justified amount worked out to Rs. 2,29,.729 .00 . The aforesaid conclusions and findings of the Arbitrator are found to be passed on appreciation of records of the case and, thereforee, no interference is called for in respect of the aforesaid award as well.

(15) Claim No. 6: Next claim as against which objection has been filed by the respondent relates to Claim No. 6 which is a claim for Rs. l,24,712.00 on account of provision of grooves in plaster between Rcc slabs and walls. In respect of the aforesaid claim, the Arbitrator held that grooves were in fact provided by the petitioner at the site and, thereforee, the petitioner is entitled to the aforesaid claim. He further held that the Cpwd specifications are applicable to the aforesaid work and the D.S.R. specifically provides separate for provision of grooves. In M.D.R. Israni v. Dda reported in 1989 (2) Arb.LR 349, this Court held that grooves are to be put on plaster surface. The Arbitrator has also considered the ratio of the aforesaid decision and on appreciation of the entire facts and circumstances of the case came to the conclusion that since grooves were provided by the petitioner, thereforee the petitioner is entitled to the aforesaid claim. The objection of the Dda, thereforee, has no merit and the award of the Arbitrator stands sustained.

(16) Claim No. 8: In respect of the next claim as against which objections has been filed by the respondent which is Claim No. 8 is a claim for Rs. 64,324.00 on account of scaffolding for execution of left over work of previous agency. The Arbitrator after following the observations made by this Court in the case of Shiv Kumar Wasal & Co. v. Delhi Development Authority reported in 1991 Arb.LR 101 held that the petitioner is entitled to the aforesaid claim of Rs. 64,324.00 . Since the aforesaid award has been made by the Arbitrator on the basis of the principles laid down by this Court in Shiv Kumar Wasal & Co. (supra) with which I respectfully agree, there is no merit in the objection filed by the respondent in respect of the aforesaid claim and the award passed by the Arbitrator in respect of this claim stands sustained.

(17) Claim No. 9 : Claim No. 9 relates to claim for pursuit, pendente lite and future interest at the rate of 18 per cent per annum. In respect of the aforesaid claim, the Arbitrator has awarded 15 per cent per annum as pursuit interest as also for pendente lite and future interest. It is settled law that the Arbitrator is entitled to grant of pursuit, pendente lite and future interest. It is held in Hindustan Construction Co. Ltd v. State of Jammu and Kashmir : AIR1992SC2192 , it was held that award of pendente lite and future interest is within the discretion of the Arbitrator. Grant of pursuit interest at 15 per cent per annum has also been upheld in the case of Pawan Joinery Mills v. Delhi Development Authority reported in 1993(2) Arb. Lr 132. In view of the aforesaid position in law, the award passed by the Arbitrator in respect of the aforesaid claim relating to grant of interest is held to be justified.

(18) In the result, the objection filed by the respondent is held to be without any merit and the same accordingly stands rejected. The award passed by the Arbitrator is made a Rule of the Court. The petitioner shall also be entitled to interest at the rate of 15 per cent per annum from the date of decree till the date of realisation. Let a decree be prepared in terms of the award.


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